Chapter 25 Lesson & Quiz Market Planning

CHAPTER 25

MARKETING PLANNING

HL ONLY Porter’s five forces

Porter’s five forces model is to classify and analyze
competitive pressures in the marketplace.

Michael Porter, a professor at the Harvard
Business School, identified five forces that
influence a business in the marketplace.

The attractiveness of the marketplace is
therefore determined by the threat to the
business while in the market. These five forces
and the model indicate that the potential
threats are:

1.The threat of Industry Rivalry: A

marketplace is not attractive it has intense
competition, pricing wars, the introduction
of new products or constant promotion
campaigns. The number and variety of
competitors is a threat that will determine if
a business should enter or exit the market.

2.The threat of new entrants: Similar to the
above, if barriers to entry and exit are very
low and new entrants swarm the market, the
overcapacity will lead to falling prices and
consequently earning. The best case would
be for entry and exit barriers to be high. This
basically means that barriers such as
technology, or finance do not allow everyone
to join the market. In addition, if the high
investment will lead to a difficult exit, this is
also a desired high barrier effect.

3.The threat of substitute
products: If advances in
technology or price declines
occur, this is a threat that is
undesired. The actual or potential
substitute effect due to price
changes will draw away earnings
and profit.

4. The threat of buyers bargaining
power: When buyers are organized and
concentrated they are capable of
inflicting influence due to pricing
sensitivity. A slight increase in price will
lead to declining earnings and profit.

and
5. The threat of supplier bargaining power:
When suppliers are able to raise prices due to
the lack of an alternative, this will also
adversely affect earnings and profit. By being
organized or concentrated, suppliers can pose
a challenge. Having multiple supply sources
or deciding on backward vertical integration
(buying or merging with the supplier) is the
best solution.

A quota is whereby the data collector has a limited
number of data collected in several categories. For
this choice, it may not be necessary to sample the
entire target population and by limiting the number
the business is able to meet cost or time factors.

A simple random sample will assume that every
member of the sample population has an equal
chance of selection. This probability sample will limit
bias and allow for a broader representation.

Stratified samples are data collected in exclusive groups perhaps
people over 40 years, and people who are female. Random
samples may then be drawn from these groups. This probability
approach is useful for a more specialized insight into a target
group.

A cluster sample is an area such as a particular neighborhood,
town or region of the country. In drawing information that is
more specialized, this approach will provide a less distorted data
set.

Snowballing is the use of referrals from the data sample to
continue the collection. Therefore the group appears to getting
bigger like a snowball rolling down a hill. The usefulness in this
is that bias is removed form the sampling and is highly focused.

In order to identify a trend from data, we must
distinguish between the terms used.
In sales forecasting, the Moving Average is determined
by calculating the average of any series of date. The
process of Centering is then used to find a midpoint of
the Moving Average.

Yearly Sales of a Fashion Boutique ($000)

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

400

200

600

100

95

250

450

500

800

700

400 300 265 148.4 265 400 583.3 666.6 ---- avg of 3 years

In the year 2003 the moving 3-year average is calculated by
determining the Moving Average of the years 2002, 2003 and
2004.

This is 400+200+600/3 = 400.

In the 2004 moving 3-year moving average the last sales
figure for 2003 is included as is the 2005 figure

This is 200+600+100/3 = 300

In the 2005 moving 3-year moving average the last sales
figure for 2004 is included as is the 2005 figure

This is 600+100+95/3 = 265

Multiple Choice

The threat of buyers' bargaining power is significant when buyers are:

• disorganized

• concentrated

• indifferent

• few in number

Multiple Choice

The influence of buyers on pricing is due to their ______.

• A) market dominance

• B) pricing sensitivity

• C) advertising strategies

• D) product quality

Multiple Choice

In simple random sampling, every member of the sample population has an equal chance of ______.

• Rejection

• Selection

• Exclusion

• Bias

Multiple Choice

A quota is whereby the data collector has a ______ number of data collected in several categories.

• Limited

• Unlimited

• Random

• Biased

Multiple Choice

What is the main purpose of using a simple random sample?

• To increase bias

• To limit bias

• To sample the entire population

• To categorize data.

Multiple Choice

Stratified samples provide specialized insight into a ______.

• random group

• target group

• single group

• large group

Multiple Choice

In the context of the image, what does the process of Centering help to find?

• The highest sales

• The lowest sales

• A midpoint of the Moving Average

• The total sales.

Multiple Choice

Fill in the blank: The Moving Average is determined by calculating the average of any series of ____.

• dates

• sales

• products

• customers

Multiple Choice

What is the sales figure for the year 2005?

• 100

• 200

• 600

• 95

Multiple Choice

Calculate the Moving Average for the years 2002, 2003, and 2004.

• 400

• 300

• 265

• 148.4

Multiple Choice

Which of the following years had the lowest sales?

• 2003

• 2005

• 2006

• 2007

Multiple Choice

What is the moving 3-year average for the year 2003?

• 300

• 400

• 500

• 600

Multiple Choice

What is the formula used to calculate the moving 3-year average for 2005?

• (600 + 100 + 95) / 3

• (200 + 600 + 100) / 3

• (400 + 200 + 600) / 3

• (100 + 95 + 200) / 3

Multiple Choice

Which year is not included in the moving 3-year average calculation for 2003?

• 2001

• 2002

• 2003

• 2004

Multiple Choice

What is the result of the moving 3-year average calculation for 2004?

• 200

• 300

• 400

• 500